1107 Focus Spring 2020 Print - Page 30

make sure you’re prepared for
private sector changes
by Jack Bonehill
tax assistant manager at
dains accountants
Does your business:

Utilise workers who are not paid through your

Use temps through recruitment agencies?
If you answer ‘yes’ to either of these, you could be
affected by the off-payroll working rules for the
private sector, effective from 6 April 2020, and you
should determine if you are*.
If you are affected, you should prepare for the rules
to ensure compliance. Failure to comply may result
in tax underpayments, along with interest and
potential penalties.
Obligations of affected businesses
It is the responsibility of the business using the
worker (‘the client’) to assess whether the rules
apply in relation to the worker.
To make that assessment, the client must
determine whether, if the worker contracted with
the client directly, they would be an employee of
the client – any entities between the client and
the worker are ignored. If the worker would be an
employee, the rules apply. Reasonable care must be
taken when making the assessment.
The assessment must be passed down the supply
chain, and the client must respond to worker
disagreements with the assessment within 45 days.
The entity paying the intermediary must then
process that payment through its payroll, paying
PAYE, National Insurance and Apprenticeship Levy
where appropriate. If that is not done, all entities
in the supply chain can be responsible for liabilities
For smaller businesses, there is an exemption. If the
client business qualifies as ‘small’ the supply chain
is outside the rules. A client is small where it meets
at least two out of the following three criteria –
turnover less than £10.2m; balance sheet total less
than £5.1m; fewer than 50 employees. Therefore,
monitoring the impact of growth in the business is
When are businesses affected?
What should affected businesses do?
Businesses using workers who provide their services
through an ‘intermediary’ are affected.
Businesses should start preparing for the rules, to
ensure compliance whilst minimising costs.
An “intermediary” here means a limited company,
partnership, or individual, meeting certain
conditions, but it is usually a limited company where
the worker is the sole owner, typically called a
personal service company (‘PSC’).
Whilst preparation will vary from business to
business, those affected should identify the
workers being used through intermediaries and
assess whether the rules apply to those workers.
It does not matter whether the client contracts with
the intermediary directly or whether other entities
are between the business and the intermediary. So,
if the supply chain reflects the diagram below, the
business would still be affected.
It may be tempting to take the line of least
resistance and put all workers on the payroll.
However, this will result in increased costs to the
business and may result in losing or being unable to
attract valuable workers. It is recommended that all
potentially affected businesses seek professional
advice as soon as possible.
To find out how Dains Accountants can help
you and your business to prepare for off payroll
working rules, please call 01782 262121
*This article is based on draft legislation,
which may be changed.


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